Westpac Banking Corporation v Gibbons (No 2) - [2011] SASC 186

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
WESTPAC BANKING CORPORATION v GIBBONS (No 2)
[2011] SASC 186
Reasons of Judge Lunn a Master of the Supreme Court
25 October 2011
PROCEDURE
Application for payment out of Court of monies paid into Court from the surplus on a mortgagee's sale of land - two opposing claimants sought a summary determination in their favour on affidavit evidence - when a summary determination is permissible - claim of one intervener raised a disputed factual issue which best determined by a formal trial - summary determinations declined and directions for a trial to be given.

WESTPAC BANKING CORPORATION v GIBBONS (No 2)
[2011] SASC 186
JUDGE LUNN:
Reasons on application of Suzan Gibbons for payment of monies out of Court
Abbreviations

In these reasons:
“KG” is the defendant, Kirk Gibbons, who is now bankrupt;
“SG” is Suzan Gibbons, an intervener, who is the wife of KG;
“Westpac” is the plaintiff, Westpac Banking Corporation;
“AS” is Anthony Angel-Smith;
“the Wirrina property” is the property at 38 Seaview Road, Wirrina Cove, being the land in Certificate of Title Volume 6069 Folio 948;
“the Cape Jervis property” is the property at Cape Jervis which is the land in Certificate of Title Volume 5358 Folio 691.[1]
[1] There have been several changes in the title reference to this property, but this reference is sufficient to identify it.
The Cape Jervis property
KG and SG were originally the joint owners of this property. SG alleges that she made substantial contributions to its acquisition and improvement. It was mortgaged to the Commonwealth Bank.
In September 1975 the Commonwealth Bank exercised its power of sale as mortgagee and sold the Cape Jervis property to AS, who in turn mortgaged it to Citibank Ltd and later to others.
On 24 April 1998 AS transferred the Cape Jervis property to KG, but not to SG.[2] SG now claims that there was a resulting trust impressed on KG’s interest in this property after he became its sole proprietor, representing her interest in it emanating from her contributions to its original acquisition and its improvement.
[2] It appears the money paid by KG to AS for this transfer came from the proceeds of a personal injury claim which had been received by KG.
On 30 September 1999 KG mortgaged the Cape Jervis property to Westpac. On 14 August 2003 that mortgage was discharged, but KG gave a new mortgage over it to Westpac to secure monies which he owed to it.
In September 2007 SG lodged a caveat over the title to the Cape Jervis property claiming an indefinable interest in the land from her contributions to its acquisition and improvement. That caveat remained on the title.
Westpac exercising its powers as mortgagee sold the Cape Jervis property and on 27 October 2010 applied the whole of the sale price of $500,000 in reduction of KG’s indebtedness to it. After this, KG still owed a balance of $87,886 to Westpac.
The Wirrina property
On 14 July 2003 KG as the sole proprietor of the Wirrina property gave a first mortgage over it to Westpac to secure monies which he owed to it. On 16 July 2004 KG gave a second mortgage over this property to Dorian Pozzan, the first intervener, to secure repayment of a loan.
Westpac, exercising its powers as mortgagee, sold the Wirrina property and on 3 December 2010 applied part of the proceeds of its sale to discharge the balance of the monies owing to it by KG. On 23 February 2011 it paid the surplus of $128,114.35 on this sale into Court in this action, pursuant to s 47 of the Trustee Act.
Applications for payment out
On 4 March 2011 Dorian Pozzan applied by application FDN15 for payment out of the monies in Court in part satisfaction of his second mortgage over the Wirrina property. I granted him leave to intervene in the action for this purpose. A company, Findon Developments Pty Ltd, also applied for payment out of the money in Court to itself, but it abandoned that claim after I ruled that it did not have a valid equitable mortgage over the Wirrina property.[3] The trustee in bankruptcy of KG did not make any claim for the monies in Court. Various other persons, who may have had claims to the money, did not respond to invitations to make applications for payment out. On 29 September 2011 SG filed a belated application (FDN33) claiming those monies and an account to determine the amount to which she was entitled. She did not challenge the first intervener’s claim under his second mortgage, but contended that her claim for a resulting trust took priority over it. The first intervener and SG each sought a summary determination of their respective claims to payment out of the monies in Court. I am now dealing with those applications.
[3] See my reasons of 22 July 2011, FDN30.
Both interveners argued their cases on the basis that on the evidence before the Court a summary determination could be properly made in their favour for payment out.[4] Neither counsel addressed the question of what orders should be made if it was not proper to make a summary determination in favour of either intervener. However, for the reasons set out below, that is my conclusion.
[4] In SG’s case her counsel conceded that on some possible findings there would need to be a further inquiry about the amount actually payable to her.
The practice of the Court has been usually to attempt to determine applications for payment out under s 47 of the Trustee Act, and like applications, on affidavit evidence and without the delay and expense involved in a full trial of the issues. There is no rule of Court on the topic. The practice books are unhelpful. On the equivalent English practice it is said that the Master has a discretion to refer the application to a Judge where the Master cannot properly dispose of it, but there is nothing said about what happens when it gets to the Judge.[5]   What are regarded as cases fit for summary determination varies to some extent depending on the jurisdiction which is being exercised[6] and the amount at stake. It has been said that whether justice can be done in a summary manner is a question of degree and whether pleadings, disclosure, cross-examination and the like would be desirable.[7] This applies to applications for payment out.
[5]    See Atkins Court Forms, 2^nd Ed, Volume 31, p 55.
[6]    Eg 6RR 202, 232 or 312(12).
[7]    Seachange Management Pty Ltd v Pital Business Pty Ltd (2009) 23 VR 396.
In a similar jurisdiction under Part 17 of the Real Property Act 1886 for summary orders for possession of property, the Court has adopted a procedure that where the entitlement to possession cannot be properly determined on the affidavit evidence filed in that action, there can be pleadings, the usual interlocutory orders for civil actions and then a formal trial of the issues raised by the pleadings.[8] It may be that it is appropriate to give those types of directions in this action to resole the respective claims of the first and third interveners to monies in Court, but I will hear the parties further on that.
[8] Moonta Corporation v Rodgers (1980) 26 SASR 143 at 160. For other cases where this procedure has been used, see Civil Procedure South Australia Volume 1 paragraph 6R [204.15].
The issues for determination
The issues for determination are whether SG has an equitable interest in the Cape Jervis property and whether that interest takes priority over the second mortgage on the Wirrina property. Counsel for SG put forward complex arguments based on equitable doctrines of subrogation and marshalling to show that SG has a good claim to the money. However, all of the submissions were predicated upon SG having an equitable interest in the Cape Jervis property and, in particular, that that interest had not been extinguished by its sale to AS. The crux of her case was that there was an arrangement between herself, KG and AS that AS took the title to the Cape Jervis property under a mortgage by defeasance so that he was obliged in equity to re-transfer it to KG and SG upon being re-paid the money which was secured by it. She then contended that although for unexplained reasons AS had transferred the Cape Jervis property only to KG, nevertheless the interest in it which he mortgaged to Westpac was subject to a resulting trust in her favour for her original contributions to the acquisition and the improvement of that property.
The evidence of SG on the alleged mortgage by defeasence was in paragraphs 70-76 of her affidavit (FDN37) where she deposed:
70.Since the defendant was not earning sufficient income to enable us to service the debt on the Property, we entered into an arrangement with a friend of ours, Anthony Angel-Smith whereby Mr Angel-Smith paid out the amount owing on the Property to the Commonwealth Bank in the sum of $142,000 and took a transfer of title to the Property on the understanding that he would retransfer the Property when we were in a position to pay back the money he had outlaid.
71.At that time the Property was worth significantly more than $142,000 and the transfer was not absolute but by way of security only.
72.We continued to live in the Property as normal.
73.Mr Angel-Smith financed the payment by mortgage of the Property to Citibank Ltd.
74.In 1998 the defendant had recovered and we had sufficient means (principally from a motor accident insurance payout) to repay Mr Angel-Smith and take a retransfer of the Property.
…
76.For reasons that I did not then and still do not understand the Property was transferred into the defendant’s name only however at no stage did I relinquish or intend to relinquish my interest in the Property.
No objection was taken to the admissibility of these paragraphs at the hearing before me. However, they are essentially the statement of a legal conclusion rather than evidence which SG could give about the transactions with AS. She has not descended into the detail of what was said and done, or produced many of the relevant documents which presumably formed part of the dealings. She has adduced no evidence from KG[9] and AS. In all, it is an unsatisfactory basis upon which to sufficiently justify a summary determination that there was such a mortgage by defeasence.
[9] There was no suggestion in SG’s affidavit that there was any reason why she could not obtain supporting evidence from KG.
The first intervener strongly attacked the veracity of what SG had deposed to in the paragraphs quoted. I need not go into the details, but he referred to a number of apparent inconsistencies and anomalies which could well affect the weight to be given to what SG had said.
Whether paragraphs 70-76 of the affidavit of SG are correct can only be properly and justly determined at a full trial where the parties can adduce evidence from all those involved and cross-examine on the disputed evidence. There are also other issues which are best left to a trial, such as the contention of the first intervener that the Westpac debts from KG secured over the Cape Jervis property and the Wirrina property were separate liabilities and did not form a common fund so as to attract the operation of the doctrines of marshalling or subrogation.
I do not consider there is any other way in which the claim of SG to the money in Court can be justly resolved other than by a conventional trial of the issues. Cross-examination on her affidavit is unlikely to be sufficient because of the involvement of other potential witnesses in the dealings. There is no other point raised by the first intervener which would decisively defeat any claim of SG, even if the factual issues mentioned were decided in her favour.
I will now hear the parties on what directions should be given about the further steps necessary to resolve the issue.